SWOT analysis of Starbucks

Company Background
Name

Starbucks Corporation

Logo
Industries served

Restaurants, Coffeehouses

Geographic areas
served

Worldwide

Headquarters

U.S.

Current CEO

Howard Schultz

Revenue

$ 13.29 billion (2012)

Profit

$ 1.38 billion (2012)

Employees

149,000 (2012)

Main Competitors

McDonald's Corp., Dunkin' Brands Group, Inc., Nestl

S.A., Green Mountain Coffee Roasters, Costa Coffee,
Caribou Coffee Company.

Starbucks is the premier roaster, marketer and retailer of specialty coffee in the world,
operating 20,000 coffeehouses in more than 60 countries. It is the no.1 brand
coffeehouse chain in the world.

Strengths

Sound financial records

No. 1 brand in coffeehouse

segment valued at $4 billion

Starbucks experience

Largest coffeehouse chain in the

Weaknesses

Coffee beans price is the major

influence over firms profits

Product pricing

Negative publicity

world

Employee management

Opportunities

Extend supplier range

Expansion to emerging economies

Increase product offerings

Expansion of retail operations

Threats

Rising prices of coffee beans and

dairy products

Trademark infringements

Increased competition from local

cafes and specialization of other
coffeehouse chains

Saturated markets in the

developed economies

Supply disruptions

Strengths
1.

Sound financial records. Starbucks profitability has been rising for the past few
years and is now 14%. The company also outmatches its nearest competitors with
24.54% return on investment and 29.16% return on equity.

2.

No. 1 brand in coffeehouse segment, valued at $4 billion. Starbucks has a

strong brand reputation associated with quality coffee and excellent customer service.
Its brand is the most valuable brand in coffeehouse segment and is valued at $4 billion.

3.

Starbucks experience. One of the strongest advantages Starbucks has is the

experience it delivers to its customers with perfectly blended coffee, premium music,
friendly staff and warm atmosphere, which results in incomparable customer service.

4.

Largest coffeehouse chain in the world. The company operates around 20,000
coffeehouses in 60 countries, making it the largest coffeehouse chain in the world.

5.

Employee management. The company offers its employees extensive range of

benefits and a pay rate higher than offered by competitors.

Weaknesses
1.

Coffee beans price is the major influence over firms profits.Starbucks

profitability and its coffee price are largely dependent on prices of coffee beans, which is
a commodity and cannot be controlled by Starbucks. Due to hedge funds, weather
conditions and many other factors, Starbucks cannot estimate the price of tis coffee and
companys profitability.

2.

Product pricing. Starbucks offers great coffee and customer experience but that
results in high price of its products. In comparison, McCafe premium coffee was price
lower than Starbucks coffee and was better evaluated.

3.

Negative publicity. The corporate continuously receives negative publicity over

its poor efforts of becoming greener company, tax evasions and poor treatment of some
suppliers.

Opportunities
1.

To extend supplier network. Starbucks doesnt grow its own coffee beans but
has to buy them from various suppliers, which are mainly clustered in South America,
Arabia or Africa. For Starbucks to ensure critical supplies for its operations in Asia,
reduce the dependence of good or bad harvests in Africa and South America and to
save on shipping costs, Starbucks has to extend its supplier network.

2.

Expansion to emerging economies. There are great opportunities for

coffeehouses in China and India, in which Starbucks has comparably only modest
number of restaurants.

3.

Increase product offerings. The business could expand the number of

coffeehouses that offer wine and beer, plus adding some new products and reaching
broader customer group.

4.

Expansion of retail operations. Starbucks does not only manage coffeehouses

and franchises but sells some of its products through other retailers. The firm should
form more of such partnerships and offer to sell its coffee, for example, in supermarkets.

Threats
1.

Rising prices of coffee beans and dairy products. The chain strongly depends
on the coffee beans and dairy products prices, which Starbucks cannot control or can
hardly estimate.

2.

Trademark infringements. The company is often involved in cases over illegal

use of its trademark, which is costly and detrimental for Starbucks.

3.

Increased competition from local cafes and specialization of other

coffeehouse chains. Local cafes can offer much lower price and more suited menu for
its customer. Big coffeehouse chains specialize so they wouldnt need to compete headto-head with Starbucks. In both situations, Starbucks experiences intense competition
and loses market share.

4.

Saturated markets in the developed economies. Coffee markets in the

developed economies are already saturated and with intensifying competition,
Starbucks will find it hard to grow in these markets.

5.

Supply disruptions. Due to political, economic and weather conditions

Starbucks may experience supply disruptions, adding significant cost to the firm.
Sources

1.

Chen, J. (2013). 2013, The Year of Starbucks. Available at:

http://seekingalpha.com/article/1103821-2013-the-year-of-starbucks

2.

Starbucks (2013).Investor overview. Available at:

http://investor.starbucks.com/phoenix.zhtml?c=99518&p=irol-irhome

3.

Interbrand (2013). Best Global Brands 2012. Available at:

http://www.interbrand.com/en/best-global-brands/2012/Best-Global-Brands-2012.aspx

4.

Wikipedia (2013). Starbucks. Available at: http://en.wikipedia.org/wiki/Starbucks